specializing in this field, including tax administrators, may not
understand the law in the correct perspective or a particular provision
may go unnoticed because of the number of amendments made to the tax
enactments from year to year; therefore, it would be a travesty of
truth and justice to hold that an assessee ought to have known the
correct law and comply therewith, even though he was not aware of the
provisions. ITAT, MUMBAI BENCHES ‘E’: MUMBAISunilchandra Vohra
v.ACITITA No. 4963/Mum/2006June 23, 2009
RELEVANT EXTRACTS:
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12. We have heard the rival submissions and perused the record. It is
not in dispute that the liability to pay tax under section 2(22)(e) of
the Act arose for the first time in the assessee’s case. He, being an
Engineer by profession, claimed that he was not conversant with the
provisions of the I.T. Act and hence he was not conversant with the
provisions of the I.T. Act and hence he was filing the return by taking
the assistance of C. A. from year to year. But, at no stage, the
accountant, who was professionally qualified, brought to the notice of
the assessee the possibility of applicability of the provisions of
section 2(22)(e) of the Act. The tax authorities have not disputed, in
principle, about the incorrect guidance by the C.A. They were of the
opinion that the assessee ought to have informed the Assessing Officer
voluntarily ignoring the fact that as per the procedure prescribed
under law the burden is not cast upon the assessee to annexe the copy
of the books of account along with return of income. It is also not the
case of the Revenue that the return of income and the annexure thereto
are not as per the requirements of the provisions. Merely because loan
was cleared within the year and thus do not find place in the Balance
sheet, one cannot jump to the conclusion that the assessee withheld the
information till an enquiry was made during the course of assessment
proceedings.
13. The tax laws in this country are so complex and complicated that
even a person specializing in this field, including tax administrators,
may not understand the law in the correct perspective or a particular
provision may go unnoticed because of the number of amendments made to
the tax enactments from year to year. Under these circumstances, it
would be a travesty of truth and justice to hold that an assessee ought
to have known the correct law and comply therewith, even though he was
not aware of the provisions. In the case of Kaushal Diwan vs. ITO 3 ITD
432, the learned Accountant Member observed, on an analogous situation,
that the tax provisions are so complex that even he was not aware of
the provision in question till the matter was placed before the Bench.
Similar view was taken in the case of WTO v. S.P. Jai Kumar 3 ITD 221
(Mad.). The Bench observed that the plea of ignorance of law can be
treated as a proper explanation. Such explanation can be said to have
been substantiated when it is shown that (a) he was assisted by a
professional C.A. who has not brought to his notice the applicability
of provisions of section 2(22)(4) of the Act and (b) by making a
statement that this is the first year in which these provisions came to
be applied in assessee’s case. It could thus be seen that the assessee
tendered an explanation which was substantiated and thus the burden is
cast upon the Revenue to prove that the explanation is false so as to
invoke Explanation 1 to section 271(1)(c) of the Act. Except merely
stating that the assessee ought to have furnished the loan particulars
voluntarily, along with the return of income, no other reason was
assigned by the tax authorities to dispute the bona fides of the
explanation. Under the peculiar facts and circumstances and in the
light of decisions cited by the learned counsel for the assessee, we
are of the view that the explanation of the assessee is bona fide and
hence the case falls outside the ambit of Explanation 1 to section 271
(1)(c) of the Act. In other words, no case was made out by the tax
authorities to levy penalty under section 271(1)(c) of the Act. We,
therefore, set aside, the orders of the tax authorities and cancel the
penalty levied by the Assessing Officer.